Congress Approves $858 Billion Tax-Cut Bill

Congress passed an $858 billion bill to extend the Bush tax cuts for two more years and slash the employee payroll tax, along with a slew of temporary tax incentives. The bill now moves on to the president for signature.

The tax cuts have widespread approval among the American public. A Wall Street Journal/NBC News poll found that 59% approve of the tax cuts, while 36% disapprove. Among those polled, 61% said the tax-cut agreement was a fair compromise for Democrats and Republicans. In general, the public approved of President Obama’s handling of the matter.

Speaking with reporters prior to a meeting with CEOs Thursday, President Obama said: "I am absolutely convinced that this tax cut plan, while not perfect, will help grow our economy and create jobs in the private sector."

In addition to extending income-tax cuts and lowering the employee payroll tax, here are some specifics on how the tax-cut legislation may affect you:

Income-Tax Rates: Individual income tax rates, topping out at 35% for the wealthiest taxpayers, would remain at the Bush-era tax levels for all taxpayers until 2013.

Employee Payroll Tax: The employee's portion of payroll, or FICA, taxes, would be cut to 4.2% from 6.2% on the first $106,800 of wages for 2011. For top earners, the cut would translate into a $4,272 bump in the paycheck for married working couples, or $2,136 for singles.

Capital Gains and Dividend Rates: The top rate on long-term capital gains and qualified dividends would remain at 15% for two years.

Alternative Minimum Tax: The AMT, initially designed to prevent the rich taxpayers from using loopholes to avoid paying any federal income tax, was never indexed to inflation. As a result, a growing number of middle-class taxpayers are getting hit with the tax. The new proposal would extend a two-year "patch" for 2010 and 2011, which would keep the AMT exemptions at 2009 levels. Unless a patch is enacted, the exemption for married couples filing jointly will drop to $45,000 from nearly $71,000, and more than 30 million taxpayers will owe AMT for 2010.

Unemployment Insurance: The proposal would extend federal unemployment benefits at their current level for 13 months.

Business-Expense Deduction: Businesses would be allowed to expense 100% of capital investments made after Sept. 8, 2010, but before Jan. 1, 2012, instead of having to depreciate the expense over time.